UNCLAS SECTION 01 OF 02 REYKJAVIK 000012

SENSITIVE

SIPDIS

STATE FOR EUR/NB, INR-B
OSLO FOR DATT
DOD FOR OSD-P (FENTON)
TREASURY FOR LAWRENCE NORTON AND ERIC MEYER

E.O. 12958: N/A
TAGS: PGOV PREL ECON PINR ASEC IC
SUBJECT: ICELAND: RUMBLE IN REYKJAVIK SHAKES GOVERNMENT


1. (SBU) Summary: The Icelandic parliament's return after its
holiday recess has been marred by the largest protests the country
has experienced since the 1949 debate over NATO membership. By
some estimates, as many as 2,000 demonstrators caused enough noise
to force a halt to the opening legislative session on the afternoon
of January 20. The Althingi reconvened later in the day, amidst
protests so severe that members of the cabinet were unable to leave
the building for several hours after the session finally concluded.
The demonstrations have carried on into a second day, forcing
another disruption in the legislative schedule and sparking a tense
confrontation in front of the Prime Minister's Office. Tension
within the governing coalition is at an all-time high, and the
government appears to be at a loss for ways to lower the
temperature. Early elections later this year now seem a
near-certainty, with even the Deputy Chair of the junior coalition
party openly calling for them. End Summary.


2. (U) On January 20, the Icelandic parliament -- the Althingi --
reconvened after a month-long holiday break. During the holiday
recess, the protest movements sparked by this fall's economic
collapse continued to organize at least one demonstration weekly,
generally in the square in front of the Althingi. Though attendance
and enthusiasm dipped over the holidays, many predicted that
pressure would start to rise again in January, both as a result of
the Althingi's return as well as the fact that the severance
packages from many of the autumn layoffs would expire during the
month. (Unemployment has gone from 5.8 percent on Dec. 24 to 7.3
percent on January 20.) A foretaste came on Dec. 31, when
protestors burst into a hotel on the square where a televised talk
show with the country's political leaders was taking place. They
were removed by police using pepper spray, but not before they
managed to halt the broadcast by setting fire to some of the
transmission equipment.

3. (U) On January 20, as many as 2,000 protestors quickly
surrounded the Althingi after it reconvened. The atmosphere was
tense as protestors generated thunderous noise, threw eggs,
snowballs, and paint as they called for new elections while
lawmakers tried to continue with their session. Some protestors
banged on the windows of the parliament building and set off
firecrackers. Police used pepper spray repeatedly to control the
crowd, which grew in size and intensity enough to force a delay in
the Althingi session. Inside the building, the opposition
Left-Green Movement used question time and open debate to reiterate
its support for the protesters, and several Left-Green MPs used the
recess periods to go outside and join the protest. Over 100 police
officers were present and over 30 people were arrested, among them
many teenagers. As night fell, the demonstrators lit a bonfire
outside the Althingi and added park benches as well as the Christmas
tree given annually to the City of Reykjavik from Oslo. Some MPs,
including the Speaker of the Parliament, could not leave the
building until late evening. The protest ended shortly after 3
a.m. following a series of violent confrontations between police and
small groups of protestors. Most observers report that the
demonstrations were only equaled by the unforgettable 1949 protests
against NATO accession.


4. (U) The following day, as protestors gathered again outside the
building, the Speaker of the Althingi cancelled the parliament's
scheduled session and instead held a meeting with the chairmen of
the political parties. They decided that on January 22 the
parliament will conduct a lengthy debate on economic issues, at
which time PM Geir Haarde will present a report on the economic
situation. This did little to sate the assembled protestors, who
later moved to the Prime Minister's Office and repeated the tactics
of the previous day. A tense confrontation ensued when PM Haarde
attempted to leave the building, as protestors blocked his car from
leaving and threw eggs and other projectiles at the vehicle. They
were finally removed by the PM's security detail.


5. (SBU) Tensions are very high within the coalition government as
well as outside government buildings. Opposition parties have
strengthened their call for early elections, with Left-Green Chair
Steingrimur Sigfusson asking the government what other way it might
have in mind to meet the demands of the nation. The Social
Democratic Alliance (SDA), the junior party in the coalition, has
moved from quiet agitation to near-open rebellion, as the SDA Deputy
Chair said in a media interview on Jan. 21 that early elections this
spring are "unavoidable." On January 21, the Reykjavik Chapter of
the SDA, the party's largest, will be holding a meeting to discuss
the coalition with the Independence Party (IP). Many SDA members
believe that the meeting will pass a resolution calling for early
elections. Meanwhile, IP dissatisfaction with PM Haarde is also

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growing, a week ahead of that party's national congress. Emboffs
have heard from two IP insiders in the last day that many fear the
PM is "not doing anything" and that the situation will only get
worse absent some dramatic action. The only prominent IP comment in
the last 24 hours has been the Justice Minister's statement that
police are ready to deal more harshly with protestors should they
continue to break the law.


6. (SBU) Comment: The January 21 demonstration may have been a
turning point in the political situation here. The raw emotion of
the demonstrations has shocked and unsettled Icelanders unaccustomed
to open civil strife. The linkage to the 1949 NATO riots, which are
seared into Iceland's collective memory, is telling. The cabinet,
especially the IP, appears confused as to how to contain the
escalating disorders. Coverage of the Prime Minister's embarrassing
encounters with the protestors has not reassured the public
regarding his leadership abilities. Undoubtedly, the government's
response has been hindered by the absence of Foreign Minister and
SDA Chair Ingibjorg Solrun Gisladottir, who is in Sweden receiving
(unexpectedly prolonged) treatment for a brain tumor diagnosed last
fall. Without Gisladottir's calm leadership, the SDA is having
difficulty finding a coherent message. As the country's new special
prosecutor investigating last fall's economic collapse begins his
work this month, reports of corruption in Icelandic business life
will only fuel popular dissatisfaction. Absent some bold and
effective move to release public pressure, the assessment of early
elections as "unavoidable" may prove to be right.

VAN VOORST